Are Traders Done With Ether? Options Market Now Prices Higher Risk for ETH Than BTC
The cost of hedging against ether (ETH) price declines using derivatives has surpassed that of bitcoin (BTC), signaling a shift in market sentiment against the second-largest cryptocurrency. This reversal follows a period where substantial investment favored ETH over BTC.
Data from Deribit and Amberdata reveals a significant difference in options pricing. Specifically, ether’s 25-delta risk reversals for August and September options show a put option premium of 2% to 7% over call options. This negative skew indicates a notable concern about potential ETH price drops. In contrast, bitcoin’s short-term put options show a more modest premium of 1% to 2.5% over call options, suggesting less pronounced downside apprehension.
Understanding these terms is crucial. A put option grants the buyer the right, but not the obligation, to sell an asset at a predetermined price by a specific date. Put option buyers are inherently bearish, aiming to protect existing holdings or profit from price declines. Conversely, call option buyers are bullish, anticipating price increases.
The 25-delta risk reversal, a strategy combining a long put and a short call (or vice-versa) with a 25% delta, provides a valuable gauge of market sentiment. The delta signifies the option’s price sensitivity to the underlying asset’s price change; a 25% delta indicates a strike price relatively distant from the current market rate. Positive values reflect bullish sentiment, while negative values indicate bearish sentiment. This strategy is commonly used in foreign exchange markets for sentiment analysis across various timeframes.
July saw ether surge 48%, hitting a seven-month high of $3,941—significantly outperforming bitcoin’s 8% gain. However, this rally, largely driven by corporate adoption, lost momentum amidst concerns about insufficient on-chain activity support. Recent price movements show ether trading around $3,600, down over 6% in 24 hours, while bitcoin experienced a 3% drop to approximately $114,380 (CoinDesk data). The divergence in derivative pricing clearly highlights a shift in investor sentiment, with increased hedging against potential ether price declines.
